VAT (Hansard, 18 November 1992)

§ Mr. Hinchliffe
To ask the Chancellor of the Exchequer what estimate he has made of the amount of value added tax which will be paid in respect of community care.

§ Sir John Cope
No such estimate has been made, but no change in the tax on domiciliary care is anticipated as a result of the transfer of resourcing from DSS to local authorities.

§ Mr. Hinchliffe
To ask the Chancellor of the Exchequer how much VAT was collected in 1991–92 on domiciliary care charges.

§ Sir John Cope
No estimates have been made of the VAT collected on domiciliary care charges.

§ Mr. Hinchliffe
To ask the Chancellor of the Exchequer if he will make a statement on the criteria for exemption from VAT.

§ Sir John Cope
VAT is a wide-ranging tax on consumer expenditure with strictly limited reliefs. Exemptions from VAT are provided for under schedule 6 to the Value Added Tax Act 1983. They refelct the United Kingdom's obligations under article 13 of the EC sixth VAT directive, subject to the transitional derogations in article 28. Article 13 specifies two categories: 235W

A. Exemptions for certain activities in the public interest, for example health, education, postal services.

B. Other exemptions.

§ Mr. Hinchliffe
To ask the Chancellor of the Exchequer if he will seek an amendment to the EC sixth directive in order to remove all domiciliary care costs from VAT.

§ Sir John Cope
My right hon. Friend has no plans to seek such an amendment.

§ Mr. Andrew Smith
To ask the Chancellor of the Exchequer what research has been done to identify and quantify the effect on the level of VAT and excise revenue resulting from the introduction of the single market on 1 January 1993.

§ Sir John Cope
The Cecchini report assessed the benefits of introducing a single European market. It did not specifically address the impact on VAT and excise revenues. It estimated that, in the medium-term, the single market could boost gross domestic product growth across the European Community by an average of 4.5 per cent. Growth of this order would provide a significant boost to VAT and excise receipts.
The introduction of the single market may give rise to some revenue loss in the United Kingdom. We estimate that the increase in cross-border shopping resulting from the abolition of intra-EC travellers' allowances will give rise to a revenue loss of around £250 million.

§ Mr. Andrew Smith
To ask the Chancellor of the Exchequer what plans Customs and Excise have to issue a VAT payers charter setting out standards of service to VAT payers.

§ Sir John Cope
The taxpayers charter, which was launched jointly by Customs and Excise and Inland Revenue, initially in 1986, and updated in 1991, sets out standards that taxpayers, including payers of VAT, can expect. In addition, Customs and Excise launched its VAT charter standard document on 22 September 1992. It sets out in more detail service standards for VAT.

§ Mr. Andrew Smith
To ask the Chancellor of the Exchequer (1) how many additional VAT inspectors' posts were identified by the Customs and Excise 1991–92 management plan as being necessary to deal with increased potential for VAT fraud under the single market; how many will actually be appointed; and if he will make a statement:
(2) how far Customs and Excise will be able to give extra attention to those businesses involved in intra-EC trade without reducing the number of visits and controls to those traders not involved in inter-EC trade.

§ Sir John Cope
The 1991–92 management plan did not quantify the additional posts to be allocated for reinforcing controls on intra-Community traders. Some 200 new posts will be created for control visiting in 1993–94. It will be for local managers to determine how best to deploy these relative to all revenue risks, whether flowing from the single market or not. Overall, Customs and Excise expects that control of the new arrangements for intra-EC trade, together with closer attention to the interpretation of VAT liability law, will increase the move towards longer and more thorough visits, and reduce to some extent the coverage of less risky traders.

§ Mr. Andrew Smith
To ask the Chancellor of the Exchequer what action is being taken to ensure that236W companies do not supply false information to the new VAT information exchange system, in collusion with trading partners in Europe in order to evade VAT.

§ Sir John Cope
The information supplied to the VAT information exchange system will be tested on visits to traders. Collusion frauds will be combated through greater use of mutual assistance arrangements between member states and the development of Community-wide intelligence systems.

§ Mr. Andrew Smith
To ask the Chancellor of the Exchequer how far the risk analysis system used by Customs and Excise for VAT control visiting is restricted to determining the relative risk of different traders rather than the overall risk to the revenue.

§ Sir John Cope
In deploying the resources available for control visiting, Customs and Excise analyses the relative risk to the revenue presented by different traders. This includes allocating resources to those traders with the greatest tax throughput to protect the overall risk to the revenue.

§ Mr. Andrew Smith
To ask the Chancellor of the Exchequer, pursuant to his answer of 2 November,Official Report, column 38, what assessment was made of the effect of a 40 per cent. cut in the number of planned VAT inspections on deterrence, tax compliance and overall tax yield in the longer term before departing from the 1991–92 management plan.

§ Sir John Cope
In reducing to about 300,000 the planned number of control visits for 1993–94, Customs and Excise estimated that there could be a drop in the additional liability readily identifiable on visits, but that the move towards longer and more thorough visits would have a strong preventive effect and provide good protection of the overall tax yield.

§ Mr. Andrew Smith
To ask the Chancellor of the Exchequer if he will give the targets applied by Customs and Excise in the last five financial years for the length of time after registration for all traders to be visited.

§ Sir John Cope
In 1988–89 and 1989–90 Customs and Excise's target was to visit each trader within 15 to 18 months of VAT registration. In 1990–91 the Department improved the target to 12 to 15 months for high-risk traders while relaxing the deadline for the remainder to 21 to 24 months. In 1991–92 it introduced more fine-tuning into the risk analysis of the newly registered trader population, and now visits traders at three intervals of no more than 12 to 15, 21 to 24 and 33 to 36 months.